Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-E - Thin capitalisation rules for inward investing entities (ADI)  

Operative provisions

SECTION 820-415  

820-415   Amount of debt deduction disallowed  

The amount of *debt deduction disallowed under subsection 820-395(1) is worked out using the following formula:

Debt deduction     ×

Capital shortfall   Average debt

where:

average debt
means the average value, for the income year, of all the *debt capital of the entity that gives rise to *debt deductions of the entity (other than *allowable OB deductions) for that or any other income year.

capital shortfall
means the amount by which the entity ' s *average equity capital for that year (see subsection 820-395(3) ) is less than the entity ' s *minimum capital amount for that year.

debt deduction
means each *debt deduction of the entity (other than *allowable OB deduction) for the income year.

Note:

The disallowed amount also does not form part of the cost base of a CGT asset. See section 110-54 .